Wednesday, June 5, 2013

Here's the ITC letter instructing U.S. customs to start seizing older iPhones, iPads in 60 days

Yesterday's disconcerting ITC decision to order (unless vetoed during the 60-day Presidential Review period) an exclusion order (import ban and cease and desist) against older iPhones and iPads over a 3G-esential Samsung patent could have been avoided. The ITC could have interpreted its statute (including the part concerning the public interest) differently; regulators could have taken decisive action against Samsung; and U.S. Congress could have amended the statute governing the ITC after hearings held last year in the Senate and the House of Representatives (admittedly held close to the end of the last legislative term), where experts warned that the ITC was unlikely to solve the problem without legislative intervention.

Some will say Apple should have taken a license, but Samsung's initial 2.4% demand was far outside the FRAND ballpark (as a Dutch court said in a ruling), and it's not known what Samsung has demanded more recently (other than that Apple still considers it excessive).

There are still various things that can be done now. Regulators could still put pressure on Samsung not to enforce (or else it would be penalized). The Federal Circuit could stay this import ban. Apple could bring a FRAND rate-setting case in federal court and seek a preliminary injunction preventing Samsung's enforcement of this exclusion order.

Some of the politicians who asked the ITC to consider the anticompetitive implications of SEP-based import bans may now ask the federal government (the President has delegated this decision to the United States Trade Representative) to veto the ban. There are pro's and con's. Since the White House, several hours before the ITC ruling, announced various initiatives to curb patent abuse including one aiming to raise the bar for ITC exclusion orders, it would only be consistent to veto this ITC decision, which is an outlier in the U.S. legal landscape. Also, Google's Motorola was required by U.S. antitrust enforcers to drop its requests for import bans against Apple and Microsoft, so it wouldn't have to do anything with protectionism to expect the same of Samsung. But since the commercial impact of this exclusion order on Apple's business would be limited (by the time it enters into force, Apple may close to shipping a new iPhone, so it might discontinue the iPhone 4 anyway), the U.S. government might just give Samsung this symbolic victory (which makes Samsung's leadership and employees proud without hurting Apple's bottom line) and instead focus on reforming legislation as quickly as possible with a view to other (future and already pending) SEP cases before the ITC bans products that really are critical to a defendant's business.

Preparations are already being made for enforcement of this order. Here's a letter that the ITC sent yesterday to a senior U.S. Customs and Border Protection official to request enforcement (after conclusion of the Presidential Review) by means of border seizures of infringing imports (this post continues below the document):

13-06-04 ITC Letter to Chief Steuart Re. Exclusion Order Granted to Samsung by Florian_Muelle_439

This kind of letter is routinely sent after import bans are ordered. Similar letters went out, to give only two recent examples, after Apple won an import ban against HTC in December 2011 and after Microsoft obtained one against Google's Motorola in May 2012. Those exclusion orders, however, did not involve FRAND-pledged SEPs. In that regard yesterday's decision was a first and, hopefully, also a last.

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